Correlation Between Steel Dynamics and 4Front Ventures

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Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and 4Front Ventures at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Steel Dynamics and 4Front Ventures into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and 4Front Ventures Corp, you can compare the effects of market volatilities on Steel Dynamics and 4Front Ventures and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Steel Dynamics with a short position of 4Front Ventures. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and 4Front Ventures.

Diversification Opportunities for Steel Dynamics and 4Front Ventures

-0.71
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Steel and 4Front is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and 4Front Ventures Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 4Front Ventures Corp and Steel Dynamics is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Steel Dynamics are associated (or correlated) with 4Front Ventures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 4Front Ventures Corp has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and 4Front Ventures go up and down completely randomly.

Pair Corralation between Steel Dynamics and 4Front Ventures

Given the investment horizon of 90 days Steel Dynamics is expected to generate 0.22 times more return on investment than 4Front Ventures. However, Steel Dynamics is 4.5 times less risky than 4Front Ventures. It trades about 0.16 of its potential returns per unit of risk. 4Front Ventures Corp is currently generating about -0.05 per unit of risk. If you would invest  10,834  in Steel Dynamics on September 10, 2024 and sell it today you would earn a total of  2,856  from holding Steel Dynamics or generate 26.36% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Steel Dynamics  vs.  4Front Ventures Corp

 Performance 
       Timeline  
Steel Dynamics 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Steel Dynamics are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile essential indicators, Steel Dynamics exhibited solid returns over the last few months and may actually be approaching a breakup point.
4Front Ventures Corp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days 4Front Ventures Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Steel Dynamics and 4Front Ventures Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Steel Dynamics and 4Front Ventures

The main advantage of trading using opposite Steel Dynamics and 4Front Ventures positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, 4Front Ventures can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in 4Front Ventures will offset losses from the drop in 4Front Ventures' long position.
The idea behind Steel Dynamics and 4Front Ventures Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
Check out your portfolio center.
Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.

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